Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive summary
- Even though selling pressure on LT government bonds remain elevated (i.e. LT bond yields are surging), EM financials have been underperforming the market in recent weeks as global outlook worsens.
- In addition, the fall in China real M1 (in 2021) has been pricing in ‘cheaper’ financials for months.
- Hence, as the global outlook is not about to change anytime soon, the ‘cheap’ EM cyclical sectors may continue to underperform in the near term and defensive allocation should continue to be investors key allocation in the coming months.
Link to full publication:
EM Financials Underperform As Economic Slowdown Accelerates
The significant liquidity injections following the Covid shock combined with the surge in ST and LT bond yields had been a strong driver of EM financial stocks until the Ukraine invasion.
However, we mentioned after the start of the war in the end of February that the momentum on cyclical stocks was clearly unsustainable as the economic outlook was set to worsen considerably. The chart below shows that even though selling pressure on LT government bonds remain elevated (i.e. LT bond yields continue to surge), EM financials have been underperforming the market in recent weeks.
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.